Cowan v Cowan

[2021] NZHC 208

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE

CIV-2021-485-13

[2021] NZHC 208

UNDER

section 143 of the Land Transfer Act 2017 and r 19.2(i) of the High Court Rules 2016

IN THE MATTER

of a caveat against dealings no. 11972976

BETWEEN

CHRISTINE MARAMA COWAN

First Applicant

TE RAHUI JOHN COWAN
Second Applicant

AND

JOHN ARTHUR COWAN

Respondent

Hearing:	16 February 2021
Appearances:	J Mason and S Roper for first and second applicants C Batt and M Moore for respondent
Judgment:	19 February 2021

JUDGMENT OF ASSOCIATE JUDGE JOHNSTON

[1]    This is an application by the first and second applicants, Christine Cowan and Te Rahui Cowan, for orders sustaining caveats over two properties, a Wellington property with certificate of title WN314/13 and a Carterton property with certificate of title WN472/68. The respondent, John Cowan, the applicants’ father, is the registered owner of both properties. John became the registered owner by survivorship after his late wife, Marama Cowan, the applicants’ mother, died on     19 March 2019. John and Marama had a third child, Elvis Cowan.

COWAN v COWAN [2021] NZHC 208 [19 February 2021]

[2]    Christine and Te Rahui make their application pursuant to the process provided for in sub-pt 7 of pt 3 of the Land Transfer Act 2017. They say they have proprietary interests in the two properties sufficient to sustain their caveats. There is a degree of urgency in relation to the disposal of the case, at least insofar as the Wellington property is concerned, because John has entered into an agreement to sell the property to a third party, and the transaction is due to settle on 25 February 2021.

[3]    The affidavit evidence filed and served in support of their application by Christine and Te Rahui is minimal, but, insofar as the factual background emerges from that affidavit evidence, and the affidavit evidence filed and served by John in response, it is summarised below.

[4]    John and Marama were married for close to 50 years. It is apparent that the marriage had its ups and downs, like most long-term relationships, but, ultimately, John and Marama remained together until Marama’s death.

[5]    As I understand the position, the couple acquired the Wellington property, which was the family home, relatively early on in their marriage. In circumstances that are not explained at all in the evidence, they acquired the Carterton property from Te Rahui in 2004. The acquisition of this property appears to have been funded in part from inheritances and in part by raising debt secured over the Wellington property. On the face of the titles, both properties were acquired and held by John and Marama as joint tenants.

[6]    In their affidavits, Christine and Te Rahui are critical of their father. Their criticism focusses on his financial contribution to the family. Christine says that in the mid-1990s he retired from his full time job and “tried various activities”. I infer that Christine and Te Rahui believe that John was not making a fair financial contribution to the family.

[7]    During the second half of the 1990s, the Inland Revenue Department commenced a claim against John for unpaid taxes, and in order to discharge that indebtedness Marama is said to have sold a property that she owned. On the evidence, it is impossible to discern whether this was separate or relationship property.

[8]    It would appear that as a result of these things John and Marama’s relationship became strained. They separated temporarily on at least one occasion. Matters seem to have come to a head in the early 2000s. In March 2002 John and Marama had a discussion about their family’s financial affairs. Christine and Te Rahui were both present. Immediately following that discussion, a short agreement was prepared in the following terms:

March 2002

This is a mutual financial agreement between John Arthur Cowan and Marama Cowan (husband and wife) of Wellington. We hereby agree and declare:

(a)THAT John Arthur Cowan sells and gifts his share of our joint family home at 170 Queens Drive, Lyall Bay, Wellington, to our daughter Christine Marama Cowan

(b)THAT it will be John’s full and final claim to the house and land should there in the future be a marriage separation, divorce or death between us.

(c)THAT should there be any balance of monies remaining from the inheritance monies we received separately through Public Trust, Wellington as beneficiaries of our friend Raymond Harry Baker’s estate will be our individual property should our marriage end in a separation, divorce or death between us.

(d)THAT any other properties or assets purchased within the marriage remain the property of the person to whose name is stated as the owner should our marriage end in separation or divorce.

(e)NOTE: THAT John have no entitlement to Marama’s Māori land interests but that they be transferred equally to our children and mokopuna on her death.

Signed ……………………     Date ………………     Witness ……………..

John Arthur Cowan

Signed ……………………     Date ………………     Witness ……………..

Marama Cowan

[9]    This agreement was not signed straight away because on 6 April 2002 Marama wrote to John. From this letter it is clear that at the time it was written they were living apart. Marama expressed frustration about John not carrying his share of financial

responsibility in the family. She urged him to “… do what was agreed at our meeting at home with Christine and Te Rahui our two adult children …”.

[10]John and Marama both signed the agreement on 21 May 2002.

[11]   There is very little evidence as to how events unfolded between the date of the execution of that agreement and early 2019 at which time Marama was diagnosed with terminal cancer. However, as already said, between those dates John and Marama acquired the Carterton property from Te Rahui.

[12]   Shortly before her death Marama engaged her solicitors to prepare a relationship property agreement. From the terms of the draft document it is clear enough that she wanted to advance the interests of her children. The document recorded that John and Marama owned both the Wellington and Carterton properties as joint tenants, and that on Marama’s death title would pass to John. It provided for the Wellington property to become Marama’s separate property and the Carterton property to become John’s (presumably just beneficially). It provided that John would make a will leaving the Wellington property to Christine and Elvis. This agreement was executed by Marama shortly before her death. It has never been executed by John. Christine and Te Rahui’s evidence is to the effect that John agreed to its terms. John denies ever having agreed to them.

[13]   There is a handwritten note which apparently is in John’s handwriting, and which appears to post-date Marama’s death, in which John effectively says that he is not prepared to sign the property relationship agreement or make a will in the terms contemplated in the same.

[14]   Christine and Te Rahui claim to have made significant contributions to the Wellington property in Christine’s case and the Carterton property in Te Rahui’s case. This evidence is unhelpfully general. Christine says that she has lived in the Wellington property most of her life (in recent years with her partner and her own children) and Te Rahui has had sole occupation of the Carterton property since selling it to his parents. There is no evidence that either has paid any rental. Christine says that she and her partner contributed to servicing the debt secured over the Wellington

property for a time (until she discovered that her father had agreed to sell it), undertook some decorating and other work, tended the garden, purchased groceries and looked after John and Marama as necessary. Te Rahui says that he carried out maintenance work such as installing a new roof, replacing the guttering and building and painting the fences at the Carterton property, and tended the garden. There is no corroborating evidence in relation to any of these things. No financial records are produced. And no attempt is made to put any value on these contributions.

[15]   Against that background, when Christine and Te Rahui discovered that their father had agreed to sell the Wellington property in late 2020, they lodged a caveat against the titles to both that property and the Carterton property. The affidavit evidence did not include a copy of the caveat. However, at my request, immediately following the hearing, the applicants’ solicitors filed and served an affidavit exhibiting the applicants’ caveat. It was lodged on 16 November 2020. The caveators are Christine and Te Rahui. They claim an estate or interest:

By virtue of an implied trust in respect of land contained in title numbers WN314/13 & WN427/68 in which the Caveators Christine Marama Cowan and Te Rahui John Cowan are the beneficiaries and the registered proprietor John Arthur Cowan is the Trustee.

[16]   The reference to an implied trust is curious, but it is not obvious to me that anything turns on that.

[17]   In their originating application dated 15 January 2021 Christine and Te Rahui plead the grounds on which they make their respective applications in these terms:

(a)As to the land in record of title WN314/13 on the grounds that the respondent holds the land in record of title WN314/13 on trust for the family of John Arthur Cowan and the late Marama Cowan and purports to sell the land in breach of that trust

(b)As to the land in record of title WN427/68 on the grounds that the respondent holds the land in record of title WN427/68 on trust for the family of John Arthur Cowan and the late Marama Cowan

(c)The trust in each case arises from one or more of the following:

(i)the conduct of the registered owners of the land in records of title WN314/13 and WN427/68 (in particular the late Marama Cowan and the Respondent as joint tenants of those lands)

showing that they held the properties for the benefit of their family

(ii)acceptance by the late Marama Cowan and the respondent that the properties were and are held by them for the benefit of their family present and future

(iii)reliance by the applicants and other members of the family on the expectation raised by late Marama Cowan and the Respondent from time to time that they held the properties for the benefit of family members and not for the sole benefit of themselves whether as the current registered owner or owners or otherwise

(iv)contributions made by family members to the maintenance of each property, payments by family members of outgoings and other property expenses from time to time,

(v)that the Respondent became sole registered owner of the properties by way of transmission without disclosing that the properties are subject to outstanding equitable interests

(d)on the grounds appearing by the affidavits filed in support of this application in particular the affidavits of Christine Marama Cowan and Te Rahui John Cowan filed herein

[18]   It will be apparent from both the terms of the applicants’ caveat and their originating application, that the focus of their claims is the alleged arrangements between John and Marama and the alleged contributions said to have been made by them to the properties —  in  Christine’s  case  to  the Wellington  property  and  in Te Rahui’s case to the Carterton property.

[19]   When Ms Mason commenced her argument before me, she signalled her intention to put the case on quite a different — and more expansive — footing. She said that she proposed to invite the Court to conclude that tikanga relating to papakāinga (original home or home base) dictated that John and Marama had a joint intention to hold their properties for the family — both the existing family and future generations. Ms Mason signalled her intention to advance an argument that on the basis of tikanga principles the Court should impose a constructive trust reflecting the family’s proprietary interest in both properties.

[20]I declined to allow the applicants to advance an argument along those lines.

[21]   I did not do so because of the pleading point. The concepts involved are not especially complicated, and no objection was raised by Ms Batt.

[22]   Nor do I say that such an argument is inherently untenable. The doctrine of constructive trust is nothing if not a malleable one. I can see no inherent objection to an argument that context is important in considering the consequences of arrangements within families, and that the Court should be astute to acknowledge that in different cultural contexts arrangements may have different consequences. If indeed tikanga concerning papakāinga is a feature within a family that dictates an outcome I can envisage this country’s common law developing to a point where tikanga may justify the imposition of a constructive trust in new circumstances.

[23]   However, as was accepted by Palmer J in Ngāti Whātua Ōrākei Trust v Attorney-General and Anor, tikanga is law proved as a matter of fact, which is why the parties in that case are calling expert witnesses.1 If a party is going to advance a tikanga-based argument, then the Court must be fully and fairly informed as to what tikanga is in the circumstance and that will almost inevitably require evidence. Here, no such evidence was offered. Ms Mason proposed to make assertions from the bar without any evidential foundation. I do not see how the Court can deal with the submission in such circumstances.

[24]It was for that reason that I was not prepared to entertain the argument.

[25]That required Ms Mason to focus on the pleaded bases for her case:

(a)first, the applicants contend on the basis of the evidence I have summarised that John and Marama had, as early as 21 May 2002, agreed to sever their joint tenancy in respect of the Wellington property at least, with the result that they should be treated as having been tenants in common in equal shares as at the date of Marama’s death; and

1      Ngāti Whātua Ōrākei Trust v Attorney-General and Anor [2020] NZHC 3120 at [36].

(b)Christine and Te Rahui were entitled to claim proprietary interests in, respectively, the Wellington and Carterton properties by reason of contributions to the properties.

[26]   Counsel were on common ground in relation to what the applicants must establish to secure an order sustaining their caveat. As both submitted, the position was summarised by the Court of Appeal in Philpott v Noble Investments Ltd:2

(a)the applicant has the burden of demonstrating that he, she or it has a proprietary interest in the land sufficient to support the caveat, but they need not establish that definitively;

(b)what the applicant must establish is that he, she or it has an arguable case for such an interest;

(c)applications to sustain caveats are summary processes and the Court will not resolve genuine factual disputes;

(d)the Court will only order the removal of a caveat if it is “patently clear” the claimant cannot succeed in establishing a proprietary interest of the sort claimed;

(e)even if the applicant can discharge the burden of establishing an arguable case, the Court has a residual discretion to refuse to make an order sustaining the same, but this must be exercised cautiously and will generally only be exercised where the applicant will not be prejudiced.

[27]   Insofar as the first limb of the applicants’ argument — that John and Marama had agreed to sever their joint tenancies of the two properties — is concerned, I am not satisfied that the evidence establishes such an intention on either of their parts.

2      Philpott v Noble Investments Ltd [2015] NZCA 342 at [26].

[28]   The 21 May 2002 agreement can only speak to the Wellington property because it was signed by John and Marama prior to the purchase of the Carterton property.

[29]   In that agreement, John agreed to sell and gift his interest in the Wellington property to Christine. The notion of both selling and gifting property does not make sense. However, I accept that on the face of things John was agreeing to transfer his interest in the property to Christine. The consequence of that would be to substitute Christine for John as one of the joint tenants of the property. That is a very different arrangement from anything that appears subsequently to have been discussed within the family.

[30]   In any event, that agreement was signed on 21 May 2002, 19 years prior to Marama’s death and 20 years prior to John agreeing to sell the Wellington property. It appears to me to be clear that John and Marama must have changed their minds over the years. If they did not, then it is extraordinary that no steps were taken to implement the 21 May 2002 arrangement. Two years later, when they acquired the Carterton property, they did so as joint tenants. In this regard I do not ignore Te Rahui’s evidence that he saw himself not as selling the property to his father and mother but to the latter, but he insisted that they should both be on the title in deference to his father’s mana. However, in the end, John and Marama chose to acquire the property jointly. The only evidence of subsequent arrangements discussed between John and Marama is the evidence of the latter’s proposal for a relationship property agreement in early 2019 which expressly accepts that John and Marama remain the joint owners of both properties and contemplates a completely different outcome from that contemplated back in May 2002.

[31]   It may well be that during the first half of 2002, when John and Marama’s relationship was at a very low ebb, they concluded that their ongoing joint ownership of the Wellington property should end. Furthermore, I accept that there is a respectable argument that Marama manifested a clear intention to rescind a joint tenancy in much the same way as the Court found had taken place in Harvey v Gateshed Investments

Ltd and that the manifestation of such an intention on the part of one joint owner amounts to something like an equitable rescission of the joint tenancy.3

[32]   However, in this case, it seems impossible to reach any other conclusion than that the parties changed their minds.

[33]   For those reasons I reject the submission made  on behalf of  Christine and  Te Rahui that there is an arguable case that the joint tenancy in relation to the Wellington property was severed.

[34]   I turn therefore to the second limb of the argument  — that Christine and     Te Rahui have Lankow v Rose type constructive trust claims in relation, respectively, to the Wellington and Carterton properties, in my view, these claims are unsustainable.4

[35]   Both Christine and Te Rahui’s claims engage that category of institutional constructive trust that arises where property — in this case, real property — is legally owned by A but B asserts a proprietary claim in relation to it by reason of having contributed to its acquisition or made post-acquisition contributions to it.

[36]This is how this category of claim is described by Lewin:5

This section is concerned with the beneficial ownership under the law of trusts, both of property held in joint names and a property held in the name of one person in circumstances where another claims, not to be the full beneficial owner, but to have some beneficial interest concurrent with the beneficial interest of the legal owner. It is principally concerned with the question of the beneficial ownership of real property occupied by two people as their home in what the House of Lords has described as the “domestic consumer context”, ie the occupation by the two parties to a co-habiting relationship, whether married or in a civil partnership or neither, and where a dispute arises between them as to that beneficial ownership.

[37]   As Lewin says, historically at least, such claims have tended to arise in the context of marriage or de facto relationships, and the classic instance of its operation in this country is Lankow v Rose.6

3      Harvey v Gateshed Investments Ltd [2013] NZHC 2253, [2014] 2 NZLR 79.

4      Lankow v Rose [1995] 1 NZLR 277 (CA).

5      Lewin on Trusts (20th ed, Sweet & Maxwell, London, 2020) at [10–050].

6      Lankow v Rose, above n 4.

[38]   In that case, Tipping J described the necessary components of a claim as requiring:7

(a)contributions, whether direct or indirect to the property;

(b)an expectation of an interest;

(c)a reasonable foundation for an interest;

(d)that the defendant should reasonably be expected to yield such an interest.

[39]   I have already described in general terms the evidence that Christine and     Te Rahui have given in relation to their contributions.

[40]   Given the nature of the test as described in Lankow v Rose, on that evidence, it is simply not possible to make an assessment of the merits of the applicants’ claims.

[41]   As already said, there is no evidence that Christine or Te Rahui have paid rent over the many years in which they have lived in the properties, and given the complete absence of any evidence as to expenses in respect of the properties I am not satisfied that they can make out — even at the level of an arguable case — a claim which would support the imposition of a constructive trust.

[42]   It is important to keep in mind that what they must demonstrate is a proprietary interest in real property. It is not simply a matter of asserting that they made some contributions to the general costs of upkeep. Certainly in this context, contributions to living costs and assisting their parents in times of illness and the like will not establish the requisite proprietary interest.

[43]   In short, I am satisfied that neither Christine, in relation to the Wellington property, nor Te Rahui in relation to the Carterton property are able to make out an

7      Lankow v Rose, above n 4, at 294.

arguable case to a proprietary interest that would justify the Court in imposing constructive trusts.

[44]   For those reasons, I decline to make an order sustaining the caveat registered over the two properties.

[45]   I reserve costs, not having heard from counsel in relation to these. My preliminary view is that the defendant is entitled to recover costs on a 2B basis. If counsel are unable to agree on costs, as I would expect them to do, they may file memoranda in the usual way.

Associate Judge Johnston

Solicitors:

Phoenix Law, Wellington for applicants Batt Law, Masterton for respondent